Railtrack, the privatised rail company, is on the verge of going bankrupt and may have to be bailed out again by the Labour government. On the eve of the general election its shares plummeted by 17 percent, below the flotation price of May 1996, when the railway system was privatised by the Tory government. Railtrack was also booted out of the FTSE 100 leading businesses. Its share price is now less than a quarter of what it was at its 1998 peak.

Why this collapse? The reason was that a Dutch investment bank, ABN Amro, published a report which calculated that the real value of Railtrack was no more than 58 pence per share. At that price Railtrack would be unable to raise money to make new investments.

ABN Amro's evaluation has been challenged as being far too low. According to Deutsche Bank, Railtrack is worth 17 times as much. Although the experts can argue, the real problem is that no one is too sure just what Railtrack's liabilities or assets amount to. It could, in the words of Guardian correspondent Keith Harper, be either a basket case or an investment opportunity.

Railtrack's investment plans for the next ten years have been scaled back by 30 percent--from £56 billion to £34 billion. This disguises some odd assumptions. For example, expenditure on the cross-London Thameslink 2000 track is no longer put at the £1 billion estimated cost, but at £150 million--which is the fine Railtrack will incur for not doing the work!

In fact, penalties loom large in Railtrack's calculations. There is the £560 million penalty Railtrack incurred following the Hatfield disaster. And if it pulls out of modernising the West Coast route, the penalty will be £250 million. One of the more absurd aspects of the penalty system is that Railtrack and the railway companies employ 300 people to argue among themselves as to who is responsible for late trains and who is to pay.

Railtrack lost £534 million last year, its first ever loss (two years ago it was making profits of £1.3 billion)--although its shareholders received a dividend of £138 million. This means Railtrack is going cap in hand to the government to ask for more handouts.

On top of the immediate cash injection of £2 billion (to pay for post-Hatfield repairs) it may have to ask for a further £1.6 billion if it cannot make cost-cutting efficiencies, £700 million for failing to meet its performance targets and £1.7 billion for West Coast modernisation if it cannot raise the money any other way. So it may be demanding something like £6 billion in the next 12 months from the taxpayer. Anger among rail workers is running high and strike action against privatisation is a distinct possibility in the months ahead.

All this puts enormous pressure on Labour's commitment to privatisation. It is now cheaper for the government to take control of Railtrack than to cough up more subsidies. For just £750 million (a sum less than half the value of Railtrack at the time of privatisation) the government could take a controlling share. For £3 billion (half the £6 billion it wants from the taxpayer) Railtrack could be taken out of the hands of the fat cats entirely.

The once proud claim that the market would make running the railways more efficient and less costly has been exposed as complete nonsense. Even Virgin points out that it costs three times as much, once the system was broken up into 100 parts, to refurbish a mile of track--£15 million as opposed to £5 million--as it did under British Rail. One of Railtrack's top five investors, Legal and General, wants to see the government take a stake of up to 25 percent--a kind of semi-nationalisation by the back door.

New Labour may tinker with the structure of the railway system (perhaps by eliminating the separation between ownership of track and the operating companies). But that cannot overcome the problem of having a vital public service run on market lines. Yet the continuing crisis of Railtrack will intensify pressure on a government which is intent on pursuing an agenda of further privatisations of public services.Gareth Jenkins

STOP PRESS

Railtrack was accused of 'lamentable failure' and 'dangerous complacency' by Lord Cullen, with the release of his report examining the causes of the Paddington rail crash in which 31 people died.

The head on crash was caused when one train went through a red signal. The signal was partly obscured by a bridge and overhead lines, and had been passed 'at danger' eight times before. Yet Railtrack did nothing.

The anger of the survivors and the victims' relatives was summed up by Tony Knox at the press conference, who held up a wanted poster with the name of the former Railtrack chief executive. 'As far as I'm concerned Gerald Corbett is wanted for serial killings on British railways,' he said

The day the report was released Railtrack's shares went up 4 percent, so confident is the company of further government subsidies.

Macedonia is at war in everything but name. The ethnic Albanian guerillas of the National Liberation Army (NLA) have steadily grown in support since fighting broke out in February, extending the reach of their military operations beyond their base in the mountains around the Albanian-populated city of Tetovo. The NLA have now taken villages near the town of Kumanovo, cutting off its water supply and, most dramatically of all, attacked the outskirts of the Macedonian capital, Skopje, where many Albanians live. The bold range of these attacks would not be possible were it not for the mass support the NLA has attracted. As one Tetovo student put it, 'I have yet to meet a single Albanian in Macedonia who does not feel some sympathy for the rebels.'

The Macedonian prime minister, Ljubco Georgievski, has repeatedly condemned the NLA as simply an import of troublemakers from Kosovo, modelled on the Kosovo Liberation Army (KLA). However, the non-Slav Muslim Albanians rightly feel discriminated against in a country where they make up 25 to 30 percent of the population but where the constitution describes Macedonia as the state of the Macedonians 'and others', where the official language is Slav Macedonian only, the official alphabet Slav Cyrillic, and the official religion Slav Christian Orthodox. Albanians are also massively under-represented in state institutions, where they make up less than 3 percent of personnel. For many, especially the young, the NLA has brought these issues to a head in a way that the Albanian parliamentary parties, the Democratic Party of Albanians (DPA), a partner in the ruling government coalition since 1998, and the Party of Democratic Prosperity (PDP), which recently joined the coalition, have failed to do. Although the parties remain in the national coalition recently cobbled together by Georgievski, it is a coalition on paper only.

Nevertheless, Georgievski is also right about the links with Kosovo. In one outburst he attacked Washington and Berlin: 'You cannot convince us that the chieftains of these gangs are unknown to your governments, nor can you persuade us that they cannot be stopped.' It is very clear that the form Albanian anger and discontent has taken--guerilla attacks designed to polarise and radicalise the two nations into mutually exclusive camps--is inspired by the successful example of the KLA and the decisive backing it received from the west during the bombing of Yugoslavia in 1999. The head of the NLA, Ali Ahmeti, for example, is a Macedonian Albanian but also a KLA veteran. Every attack by the NLA has worsened inter-ethnic relations. After the funeral of three Macedonian soldiers in Bitola, Macedonians went on a rampage, attacking local Albanians and looting their shops. The Macedonian Academy of Sciences, the country's intellectuals, recently produced a map which advocated partitioning the republic. Although the NLA has given expression to genuine grievances, its tactics are ultimately designed to convince Albanians and Macedonians that they cannot live together and are therefore only adding to mayhem in the Balkans.

The Macedonian government has been no better. It has alternated frantically between launching counter-offensives against the NLA, which have led to 20,000 Albanian refugees fleeing to Kosovo, and offering vague promises of constitutional reform. Georgievski has repeatedly threatened to declare a state of war, though he has so far been persuaded to back off by the European Union and Nato. Only this month, after the NLA killed five Macedonian soldiers, he again threatened to declare war and then withdrew an offer he had made the previous week to amend the constitution to increase Albanian rights. He explained that he had made the offer 'cynically' because of the pressure he was under from the west and the 'blackmail' he faced from his Albanian coalition partners. Increasingly hawkish, Georgievski was recently described by one official as acting like a 'crazy general'. However, his mood reflects Macedonian popular opinion.

The US, Nato and the European Union now find themselves in an impossible situation of their own making. The Kosovo intervention in 1999 has strengthened the cause of Albanian nationalism immeasurably and created a movement that threatens to escape the control of its sponsors. Little wonder, then, that the New Statesman leader commented in March, 'This is not the accidental by-product of Nato's intervention two years ago; it is the inevitable result, and it was predicted at the time.' Although the US is opposed to the Albanian insurgency in Macedonia, it cannot afford to alienate the Kosovan Albanians, its most loyal constituency in the Balkans. With 42,000 K-For troops serving in Kosovo, where the US has spent $36 million on Camp Bondsteel, the largest military base it has constructed abroad since Vietnam, conflict with the Albanians is unthinkable. Consequently, the US has been behind moves to bring about a settlement.

Robert Frowick, a US diplomat and a special envoy to the Organisation for Security and Cooperation in Europe (OSCE), secretly arranged a meeting between the two Albanian political parties and the NLA at which a deal was struck whereby the NLA would withdraw in return for a veto over government policy towards Albanians. When it was made public, the deal was widely condemned by everyone, including Nato, on the basis that politicians do not talk to what Nato secretary general George Robertson described as 'murderous thugs'. But it is very clear that the US is anxious to see such an arrangement succeed, though they cannot say so publicly. The real question, however, is whether a deal of any kind is now possible given the bitter polarisation of Macedonian society.

The nightmare scenario of the conflict spreading to involve Macedonia's neighbours, who have historical claims on its territory, also cannot be excluded. In March Bulgarian president Petar Stoyanov offered to provide troops to the government but then had to backtrack by proposing that his troops operate under UN auspices as a border protection force. Albania, Greece and even Turkey look on anxiously. Is there anyone out there who still believes the US and Nato can bring peace and stability to the Balkans?Dragan Plavsic